Life Science Compliance Update

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November 05, 2013

Johnson and Johnson 2013 Settlement and Corporate Integrity Agreement

On November 4, 2013, the Department of Justice (DOJ) announced that Johnson & Johnson (J&J) and its pharmaceutical subsidiaries signed settlement agreements to pay more than $2.2 billion to resolve criminal and civil investigations into unapproved, or "off-label," promotion of three drugs and alleged kickbacks to physicians and nursing home pharmacies over a ten-year period. In 2012, we reported on the largest health care fraud settlement in U.S. history: $3 billion paid by GlaxoSmithKline

According to the Associated Press, the J&J global settlement is the third-largest health care fraud settlement in U.S. history, and it includes a five-year Corporate Integrity Agreement (CIA) between J&J and the Department of Health and Human Services Office of the Inspector General (HHS-OIG). Key implications of the CIA for continuing medical education and compliance managers are outlined below.  Arnold & Porter, LLP also recently provided a client alert analyzing the facts behind the settlement. 

Summary of Criminal and Civil Agreements

The global resolution includes criminal fines and a forfeiture of profits totaling $485 million and civil settlements arising under the False Claims Act totaling $1.72 billion, paid out to federal and state governments as reimbursement for improper Medicaid payments.

The criminal complaint, prosecuted in the Eastern District of Pennsylvania, charged that J&J subsidiary Janssen Pharmaceuticals introduced the antipsychotic drug Risperdal into the interstate market for non-FDA-approved uses targeting the elderly and children. Under a plea agreement, Janssen pled guilty to a misdemeanor violation of the Food, Drug, and Cosmetic Act (FDCA) acknowledging that it promoted Risperdal to health care providers for treatment of symptoms and behaviors exhibited by non-psychotic elderly patients with dementia. 

The Janssen resolution includes criminal fines and forfeiture of profits totaling $400 million. Similarly, J&J subsidiary Scios, Inc. previously pled guilty to a misdemeanor FDCA violation, prosecuted in the Northern District of California, for introducing the heart failure drug Natrecor into the interstate market as an outpatient drug, without sound scientific evidence to support such use. Natrecor was only FDA-approved for use in patients with acute congestive heart failure based on a study involving hospitalized patients. The Scios resolution includes a criminal fine of $85 million.

The civil settlement agreements resolve lawsuits filed by various relators in three states under the federal qui tam, or whistleblower, provisions of the False Claims Act. According to the civil complaint filed in the Eastern District of Pennsylvania, Janssen allegedly made false and misleading statements about the efficacy of Risperdal, paid kickbacks to physicians in the form of "speakers fees" in return for prescribing Risperdal, incentivized its sales teams to continue off-label promotion of Risperdal, and promoted Risperdal as a treatment for elderly dementia patients and children with various mental health disorders despite FDA warnings against such promotion and known health risks to targeted patients.

  Additionally, Janssen allegedly promoted another antipsychotic drug, Invega, for off-label use while making false statements regarding its efficacy. J&J and Janssen agreed to pay a total of $1.273 billion to resolve the false claims, in addition to $118 million paid previously as part of a settlement in a similar Texas case involving Risperdal.

According to the civil complaint filed in the District of Massachusetts, J&J and Janssen allegedly paid millions in kickbacks to the nation's largest nursing home pharmacy, Omnicare, Inc., to induce Omnicare consultant pharmacists to actively promote Risperdal and other J&J drugs in nursing homes. 

These kickbacks were disguised as market share rebates, and data-purchase agreements. J&J and Janssen agreed to pay $149 million to resolve the allegation that the kickbacks caused Omnicare to submit false claims and unduly influenced the independent judgment of consultant pharmacists.

Finally, according to the civil complaint filed in the Northern District of California, Scios encouraged doctors to use the drug Natrecor in ways that were "unsupported by valid scientific evidence." Scios sponsored a "speaker program" where doctors were paid to promote the benefits of Natrecor, and Scios provided funding to defray the cost of off-label, outpatient administration of Natrecor. Scios agreed to pay $184 million to resolve the allegation of off-label marketing of Natrecor.

DOJ also announced that, from the federal government's share of the civil settlements, the whistleblowers in the Eastern District of Pennsylvania will receive $112 million, the whistleblowers in the District of Massachusetts will receive $27.7 million and the whistleblower in the Northern District of California will receive $28 million.  Under the three civil agreements, J&J and its subsidiaries did not admit liability or wrongdoing. In fact, in a press release, J&J expressly denied all government allegations, and noted that "Risperdal continues to be appropriately reimbursed by Medicare and Medicaid."

Corporate Integrity Agreement

As part of the global resolution, J&J has agreed to enter into a five-year corporate integrity agreement with HHS-OIG. The current CIA supersedes Janssen's obligations under a previous CIA, and the terms of the agreement end on October 31, 2018.

While DOJ's announcement stated that the CIA requires "major changes to the way [J&J's] pharmaceutical affiliates do business," J&J's press release states that the CIA is "largely consistent with existing compliance programs." In summarizing the CIA,

Compliance Week reported the following:

The CIA requires J&J to change its executive compensation program to permit the company to clawback annual bonuses and other long-term incentives from executives if they, or subordinates, engage in significant misconduct. The clawback applies to both current and former executives. It also requires J&J's pharmaceutical businesses "to implement and maintain transparency" regarding research practices, publication policies, and payments to physicians." On an annual basis, senior executives and members of its board of directors must certify compliance with provisions of the CIA and submit detailed annual reports to HHS-OIG about its compliance program.

The CIA requires specific corporate integrity obligations including:

  • Specified Compliance Officers and Committees
  • Written Standards in the form of specific policies and procedures
  • Training and Education regarding the CIA and general compliance
  • Risk Assessment and Mitigation Planning Program
  • Independent Review Procedures
  • Disclosure Program, including a toll-free compliance telephone line
  • Employee and Executive Incentive Compensation and Recoupment Policies and Practices
  • Reporting of Physician Payments

Effect on CME and Grants

For third party educational programs, the Policies and Procedures shall require that:

(1) J&J Pharmaceutical Affiliates disclose their financial support of the Third Party Educational Activity and, any financial relationships with faculty, speakers, or organizers at such activity;

(2) As a condition of funding, the third party shall agree to disclose the J&J Pharmaceutical Affiliates' financial support of the Third Party Educational Activity and any financial relationships that the J&J Pharmaceutical Affiliates might have with faculty, speakers, or organizers at such Activity;

(3) Any faculty, speakers, or organizers at the Third Party Educational Activity disclose any financial relationship with the J&J Pharmaceutical Affiliates;

(4) The Third Party Educational Activity has an educational focus;

(5) The content, organization, and operation of the Third Party Educational Activity (including the faculty, educational methods, materials, and venue) be independent of the J&J Pharmaceutical Affiliates' control;

(6) The J&J Pharmaceutical Affiliates support only Third Party Educational Activity that is non-promotional in tone/nature;

(7) The J&J Pharmaceutical Affiliate's support of a Third Party Educational Activity shall be contingent on the provider's commitment to provide information at the Third Party Educational Activity that is fair, balanced, accurate and not misleading;

Third Party Educational Activities Controls and Sponsorships Controls.

The J&J Pharmaceutical Affiliates implemented prior to the Effective Date,and shall continue to maintain throughout the term of this CIA, Compliance Controls for Third Party Educational Activities. The J&J Pharmaceutical Affiliates represent that these controls ensure, among other factors, that:

  1. all Third Party Educational Activity funding requests are reviewed, tracked, and evaluated by the Compliance organization to ensure that the requests meet compliance criteria;
  2. funding decisions are based on objective criteria such as: the qualifications of the requestor, the quality of the Third Party Educational Activity program, and the J&J Pharmaceutical Affiliates' pre-established educational goals;
  3. Third Party Educational Activity funding is provided only pursuant to a written agreement with the funding recipient and payments made to the Third Party Educational Activity funding recipient comply with the express terms of the written agreement; and
  4. the J&J Pharmaceutical Affiliates' staff are not involved in the development or implementation of Third Party Educational Activity programs funded by the J &J Pharmaceutical Affiliates (collectively, the "Third Party Educational Activity Controls").

In addition, the J&J Pharmaceutical Affiliates implemented prior to the Effective Date, and shall continue to maintain throughout the term of this CIA, Compliance Controls for sponsorships to ensure that the J&J Pharmaceutical Affiliates' sponsorships comply with all applicable Federal health care program and FDA requirements (Sponsorships Controls). The J&J Pharmaceutical Affiliates represent that the Sponsorships Controls ensure, among other factors, that:

  1. a legitimate business purpose for the sponsorship exists;
  2. a tangible benefit for the sponsorship exists;
  3. proposed costs and fees are reasonable; and
  4. prior to the sponsorship being provided and paid, there is a fully executed agreement in place which sets forth the sponsorship to be provided.

Third Party Educational Activities Monitoring.

To the extent that the J&J Pharmaceutical Affiliates provide funding for Third Party Educational Activities, the J&J Pharmaceutical Affiliates created, and shall continue to maintain throughout the term of this CIA, monitoring assessments that evaluate compliance with the Third Party Educational Activity Controls governing the process through which requesters may seek or be awarded funding for Third Party Educational Activities from the J&J Pharmaceutical Affiliates.

Monitoring Personnel shall review, and complete monitoring assessments for, at least 20 Third Party Educational Activities (i.e., Third Party Educational requests) in the period January 1, 2013 to December 31, 2013, and at least 30 Third Party Educational Activities in the second Reporting Period. Beginning January 1, 2015, and for each subsequent calendar year in the remainder of the term of the CIA, Monitoring Personnel shall review, and complete monitoring assessments for, at least the number of Third Party Educational Activities selected in accordance with the applicable Monitoring Plan and as approved by OIG.

Links to Key Documents and Materials

Video of DOJ Press Conference

DOJ Press Release

Key Documents from DOJ

Criminal Complaint

Civil Settlement Agreement

Criminal Settlement Agreement

Corporate Integrity Agreement

J&J Press Release

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well i would like to know how J&J got out of paying for destroying thousands of lives.LEVAQUIN IS ONE OF THE MOST DEADLY DRIGS ON THE MARKET. I hope that i live to see justice served.i am sure that this drug has killed many people.its just been covered up by the doctors.they don;t want to be held accountable.the scales of justice will prevail. god save us from the medical coo.

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